Stamp duty on our Hyderabad office lease: who pays, when, and what goes wrong

Your company has found an office in Hyderabad. The landlord has sent a draft lease. Someone asks, "Who is paying the stamp duty, and how much is it?"

This note answers the first half fully. On the second half, it tells you where the number comes from and why we do not print one here.

Your situation

A private company takes premises on rent. The lease is signed by a director on behalf of the company. The landlord's side wants it "on stamp paper". Your finance team wants to book the cost correctly.

Stamp duty is a State tax on a written document. In Telangana, it is levied under the Indian Stamp Act, 1899 as it applies in the State. The Act treats a lease of an office as a "lease", and the duty depends on the document, not on the office.

What counts as a "lease"

The Act defines "Lease" as "a lease of immovable property" (s.2(16), Indian Stamp Act, 1899, as in force in Telangana). An office you rent is premises on land, so expect it to be treated as a lease. Your advocate will confirm.

The same definition also takes in:

• a patta;
• a kabuliyat or other written undertaking, not being a counterpart of a lease, to cultivate, occupy or pay or deliver rent for immovable property;
• any instrument by which tolls of any description are let; and
• any writing on an application for a lease intended to signify that the application is granted.

(s.2(16)(a) to (d), Indian Stamp Act, 1899, as in force in Telangana.)

Two points follow for an office.

First, a short letter in which you undertake to occupy and pay rent can itself fall in the definition. Do not assume that calling a document a "letter of intent" or "rent agreement" takes it outside the Act; the words of the document matter.

Second, if your landlord calls the paper a "leave and licence" or "business centre agreement", have a CA or advocate read the actual words before you assume it is not a lease.

The rate: what we can and cannot tell you

You will see rates quoted on websites and by brokers. We do not repeat them, because the rate for a lease is not something we could confirm from the text we checked.

Here is what the official text shows.

The charge is created by section 3. It says instruments are chargeable with duty "of the amount indicated in that Schedule as the proper duty therefor" (s.3, Indian Stamp Act, 1899, as in force in Telangana). For instruments executed in the State of Telangana that the State schedule lists, the amount in Schedule I-A is the duty chargeable (proviso and clause (aa) to s.3, as in force in Telangana).

So the rate for a lease sits in an Article of Schedule I-A. The Act itself does not carry that figure in its body.

The State revised some Schedule I-A rates with effect from 22 July 2021 by G.O.Ms.No.59, Revenue (Registration) Department, dated 20 July 2021. That order revises a list of instruments: sale agreements, development agreements, certificates of sale, conveyance, exchange, gifts, partition, sale and settlement. A lease is not on that list. The order therefore tells you nothing about the duty on a lease, and nothing in it changes it.

What this means for you:

• Do not rely on a figure from a broker, a template or a blog.
• Check the current rate with the Telangana Registration and Stamps Department before you finalise the amount.
• Ask the Sub-Registrar's office, or your advocate, to confirm which Article of Schedule I-A applies to your lease and how the duty is worked out for your term and rent.

The deadline clock

There is no later date to hide behind. The rule is that instruments chargeable with duty and executed in India "shall be stamped before or at the time of execution" (s.17, Indian Stamp Act, 1899, as in force in Telangana).

In plain words: the stamp paper must be bought and the duty paid before the lease is signed, or at the moment it is signed. Not after possession. Not after the first month's rent.

This matters for the order in which you do things:

• Agree the lease terms and the rent.
• Buy the stamp duty, or pay it in the way the Department allows.
• Sign on that stamped paper.
• Register the lease if your advocate advises that it needs registration.

Registration is a separate law, the Registration Act, 1908. This note does not cover it. Ask your advocate whether your lease needs it.

Who pays

The Act sets a default. "In the absence of an agreement to the contrary", in the case of a lease or agreement to lease, the expense of providing the proper stamp is borne "by the lessee or intended lessee" (s.29(c), Indian Stamp Act, 1899, as in force in Telangana).

That means your company, as tenant, pays by default. The words "in the absence of an agreement to the contrary" mean the landlord and the company can agree otherwise in writing. If you split it, say so in the lease.

For a counterpart of a lease, the default is the other way. It is borne "by the lessor" (s.29(d), Indian Stamp Act, 1899, as in force in Telangana). A counterpart is the second signed copy kept by the other party.

Step by step

• Get the draft lease with every fact in it. Rent, deposit, term, premises, parties. Section 27 requires that "the consideration if any, the market value of the property and all other facts and circumstances affecting the chargeability of any instrument with duty, or the amount of the duty with which it is chargeable, shall be fully and truly set forth therein" (s.27, Indian Stamp Act, 1899, as in force in Telangana). Leave nothing out to look cheaper.
• Ask the Registration and Stamps Department which Article applies and what the duty is on your term and rent. Get the answer in writing or by a challan the Department issues.
• Pay the duty by an allowed method. Duty is paid and shown on the instrument by stamps (s.10(1), Indian Stamp Act, 1899, as in force in Telangana). In some situations the Government or the Collector may allow payment in cash, by demand draft or pay order against a challan, if stamps are short or not available in the denominations needed (s.10A(1), as in force in Telangana). That route is not yours to choose. It depends on permission.
• Sign on or after the stamping, never before. The stamp must be there before or when the lease is executed (s.17).
• Keep the original safely. If it is ever challenged, the court or authority will look at the paper first.
• Record the rent and the stamp cost in your books. Your CA will tell you how to treat each.

What not to do

Do not sign first and stamp later. Section 17 is clear on timing. A lease signed unstamped is a document that is not "duly stamped".

Do not understate the facts. Under section 64, a person who, "with intent to defraud the Government", executes an instrument in which the facts required by section 27 are not fully and truly set out, is punishable with a fine that "may extend to five thousand rupees" (s.64, Indian Stamp Act, 1899, as in force in Telangana).

Do not treat an unstamped lease as a small matter. The consequences run in three directions.

In a dispute. Section 35 says no instrument chargeable with duty "shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated" by any such person or public officer, "unless such instrument is duly stamped" (s.35, Indian Stamp Act, 1899, as in force in Telangana). If your landlord refuses to return a deposit, or you want to enforce your right to stay for the full term, you may find the lease cannot be used until the shortfall is paid.

A cure exists, but it costs. The same section lets a court or authority admit the instrument if the proper duty, or the deficit, is paid together with a penalty. The text on file reads: "a penalty of fifteen rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds fifteen rupees, of a sum equal to ten times such duty or portion" (proviso (a), s.35, Indian Stamp Act, 1899, as in force in Telangana). Where the Collector deals with an impounded instrument, section 40 allows the Collector to require the proper duty or the deficit "together with a penalty of the five rupees", or, if the Collector thinks fit, "an amount not exceeding ten times the amount of the proper duty or of the deficient portion" (s.40(1)(b), as in force in Telangana). Under section 35 the penalty is fifteen rupees or ten times the missing duty, whichever is higher; under section 40 the Collector may instead require up to ten times the missing duty. The text we checked is the Act as published for Telangana; confirm these amounts have not been changed. Confirm the current penalty with the Department before you rely on it.

Impounding. A person in charge of a public office, before whom an unstamped or short-stamped instrument is produced, must "impound the same" if it appears not duly stamped (s.33(1), as in force in Telangana). So a lease produced before a court, or before a public office such as the registering authority, can be held back there.

A fine on the signers. Section 62 makes anyone "executing or signing otherwise than as a witness" an instrument chargeable with duty without it being duly stamped liable to a fine "which may extend to five hundred rupees" (s.62(1)(b), as in force in Telangana). Any penalty already paid under section 35 or 40 is allowed in reduction of that fine (proviso to s.62(1)).

After the penalty is paid. The instrument is endorsed with the duty and penalty paid, after which it "shall thereupon be admissible in evidence, and may be registered and acted upon and authenticated as if it had been duly stamped" (s.42(2), as in force in Telangana). So an unstamped lease can be cured, but only by paying more and passing through an official.

Keep a lease register

Note for each lease: premises, parties, dates, stamp paid and who bore it. Have the board record the director authorised to sign. Keep the original safe.

What to do now

• Next step: Ask the Telangana Registration and Stamps Department for the current stamp duty on your lease, with the Article of Schedule I-A that applies. Do this before signing (s.3, Indian Stamp Act, 1899, as in force in Telangana).
• Deadline: The lease must be stamped before or at the time you sign it (s.17, Indian Stamp Act, 1899, as in force in Telangana).
• Consequence of missing it: An unstamped lease can be impounded (s.33), is not admissible in evidence or acted upon until duly stamped (s.35), and the signer may be fined up to five hundred rupees (s.62(1)), subject to the penalty text noted above.

Have a CA review your facts before you act or file.

FAQs

Who bears the stamp duty, the company or the landlord?

By default, the tenant. In the absence of an agreement to the contrary, the expense is borne "by the lessee or intended lessee" (s.29(c)). The parties can agree otherwise in the lease.

We already signed an unstamped lease. What now?

Do not wait for a dispute. Speak to your advocate about presenting the lease to the Collector, who can require the proper duty and a penalty and then endorse the document (ss.40, 41 and 42). Section 41 allows the Collector to deal with a short-stamped instrument produced of the person's own motion within one year of execution, where the omission was by accident, mistake or urgent necessity; after that, or in other cases, sections 33 and 40 apply. Fix it before you need to rely on it in a court or before an authority. Check the current penalty with the Department.

Is the rate in the 2021 order of 22 July 2021 the lease rate?

No. G.O.Ms.No.59 of 20 July 2021 lists the instruments whose rates were revised from 22 July 2021. A lease does not appear in that list, so it does not give a lease rate.

Does a short rent letter or a leave and licence need stamping?

It might. The definition of "lease" includes a written undertaking to occupy or pay rent (s.2(16)(b)). Have the actual words read before you assume it does not.

Can we pay the duty in cash or by demand draft?

Only where the Government or the Collector permits it because stamps are short or not available in the denominations needed (s.10A(1), as in force in Telangana). Do not plan on it. Ask the Sub-Registrar's office what is allowed for your lease.

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See Also

• Opened a branch in Hyderabad: how to amend your GST registration
• Section 118: minutes — the 30-day rule and what can be left out
• The new Income-tax Act from 1 April 2026: what changes for a company